Not right time to curb FII inflow: Pranab Mukherjee

In an interview with ET Now, Finance Minister Pranab Mukherjee says it's not a time to put any restriction on the inflow of FII and that the regulators are closely watching the market. Excerpts:

What do you think are the primary reasons for the market rally we are experiencing currently?

Always the fear of having some sort of bubble would remain. I do not think this is a time to put any restriction on the inflow of FII. Certain market sentiments are there. Prospective investors are looking into the market, and naturally, India as an emerging economy, along with China and some other Asian economies, is considered a safe destination for investment. One of this upswing is that robust recovery which was expected in North America and Europe has not yet taken place and the IMF forecast has also been revised. We shall have to watch the situation. We reached more than 20,000 in January 2008. So, the stock market fluctuation always takes place, but we shall have to see that it does not have that adverse impact just like a bubble effect.

Is it safe to presume here that you are in touch with the market regular and keeping a close eye on how the market has really moved today?

The Reserve Bank and SEBI, everybody concerns the Ministry of Finance. They are watching the situation. It is not unwatched.

This rally is largely because global liquidity is coming to India because people believe in the India growth story and the returns are better here. Is there a fear then that if they find another avenue for whatever reasons, this liquidity can suddenly be pulled away and that can cause the markets to crash like it perhaps did in 2008?

No. The year 2008 was a totally different thing because if you have analysed the inflows, it is not unusual. It has definitely increased, but even in this stock market, there has been gradual upswing. For few months it was at 20000, then it came down, and then again it has reached. So, these types of up and down games are taking place, but so far as the market sentiment is concerned, we are fully aware of it. I do not visualise that type of situation will happen that suddenly there will be a substantial outflow and to create an essence of uncertainty because strong points of the Indian economy is its growth and I feel growth would be 8.5%, if not a little more. So, growth is there though inflationary pressure is in the system. But we are taking various measures to contain it. There is a stable policy regime. We do not change our policy with some sort of knee jerk reactions. Financial stability is here. Therefore, our regulatory mechanism in various areas is also functioning well. Keeping that in view, the policy regime, overall sentiment environment taken together, I feel we need not be panicky, but we should be careful and cautious.